Healthcare sector to see 13.2% revenue growth in Q1FY27: MOFS report

The healthcare sector is poised for a 13.2% YoY revenue surge in Q1FY27, led by hospitals. Despite robust demand in therapies, profitability is expected to dip due to US pricing pressure and geopolitical headwinds, says Motilal Oswal.

Sector Outlook for Q1FY27

The healthcare sector is likely to post healthy growth in Q1FY27 with aggregate revenue rising 13.2 per cent YoY led by hospitals; however, profitability is expected to remain under pressure, as per Motilal Oswal Financial Services (MOFS).

The brokerage house noted that the sector has witnessed soft growth in FY26, with revenue rising 10.8 per cent YoY excluding hospitals. As per MOFS, the sector is seeing robust operating momentum supported by healthy demand. It estimates aggregate revenue to grow to 13.2 per cent year-on-year, with hospitals expected to outperform the sector. "After a subdued show in FY26 (revenue growth of 10.8% YoY excl. hospitals), we expect our Healthcare coverage universe, including Hospitals to deliver better growth in 1QFY27," it said.

Therapy Segments Show Strong Momentum

The report noted that during the first two months of Q1FY27 (April-May 2026), chronic therapies maintained strong growth momentum, registering a year-on-year increase of around 15.5 per cent. Acute therapies also showed a notable recovery, with growth accelerating to 10 per cent year-on-year in April-May 2026, compared with 7.5 per cent in FY26 and 7 per cent in FY25.

On the other hand, the domestic formulations market continued to be led by robust demand in cardiac, anti-diabetic, and vitamins, minerals and nutrients (VMN) therapies, which outperformed the overall Indian Pharmaceutical Market (IPM).

Hospital Companies to Lead Growth

Hospital companies are expected to post revenue growth of around 16.1 per cent year-on-year to Rs 133.4 billion in Q1FY27, driven by ongoing capacity additions, improved average revenue per occupied bed (ARPOB), strong operational execution, and the commissioning of new facilities.

Profitability to Remain Under Pressure

Despite the expected improvement in revenues, earnings are likely to face pressure as per the brokerage house. MOFS estimates earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow by a modest 5 per cent year-on-year, while profit after tax (PAT) is projected to decline 3 per cent year-on-year.

The decline is mainly attributed to pricing pressure in select high-margin niche products in the US and an unfavorable geopolitical environment. It noted, "US revenue is expected to decline 5.4% YoY to USD2.3b in 1QFY27, primarily due to a steep 28%/30% YoY decline in US sales."

These headwinds, however, are expected to be partially offset by favourable currency movements and robust growth in the domestic formulations segment, the report said. Overall, the brokerage house has maintained a neutral stance on the sector as per its report. (ANI)

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